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UCP Policy Strands Drivers – Will They Find New Coverage in Time?

The government froze auto insurance rates, but now insurers are skippin' town, which means lotsa folks might be left without coverage

Premier Smith’s UCP government’s decision to freeze auto insurance rates has driven an unnamed insurance company out of the province.  As a result, as many as 16,000 Albertans could lose coverage come November.

The drivers have about four months to get another company to new policies. The company, which can’t be named due to insurer confidentiality rules, is pulling out because of the UCP auto insurance rate freeze. And other insurers may follow.

Announced in January, the auto insurance rate freeze prevent auto insurance rate increases for the rest of 2023, with some exceptions. 

For example, companies can raise rates if a driver receives an at-fault claim or a ticket. Rates can also increase if drivers move to another address or insure a different vehicle. 

The rate freeze, which only applies to private passenger vehicles, is meant to improve auto insurance affordability. But some argue that the pause is doing more harm than good. 

“A rate freeze does nothing to improve the affordability of auto insurance in the near term and only pushes today’s challenges down the road,” said the Insurance Bureau of Canada in a statement. 

Alberta Finance Minister Nate Horner acknowledges that a rate freeze is a band-aid solution, not a long-term one. 

“…I would say that it’s something that we can’t leave on forever. It was meant to be a short-term affordability measure, right at the peak of the affordability crisis,” Horner told Postmedia

An Uncertain Future

Inflation has hit everyone hard, including the insurance industry. Spiking prices have resulted in double-digit increases in repair bills, replacement costs for vehicles after collisions, and surging legal expenses.

If you don’t lose your coverage in November, you might in the future. Aaron Sutherland, a vice president of the industry lobby group Insurance Bureau of Canada, claims auto insurers withdrawing from the province could become a trend.

If that happens, drivers will have fewer options for auto insurance. Sutherland argues that this will ultimately lead to increased prices, which defeats the whole purpose of the rate freeze. 

“We’re certainly hearing from consumers that there are challenges there…We think the best way we can (improve affordability) is to give drivers more choice in what it is that they’re buying,” commented Sutherland. 

Following the UCP government’s rate freeze announcement in January, the opposition NDP was quick to chime in.

“We put a cap in place, and the UCP chose to remove it, and now Albertans are paying far more than they should be,” said NDP Leader Rachel Notley.

But the NDP’s five percent rate cap introduced in 2017 was far from perfect. In fact, it led to an 11 percent increase in rates for the same reasons cited by Sutherland. 

Many insurers closed their doors to new customers because they were losing money. This resulted in fewer options for drivers, leading to increased rates. Can we expect the same in 2023? 

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